To put it simply, a bull market is a rising market. Yet, investing in a bull market while the bitcoins are trading near lifetime highs may seem risky because there is always a possibility of significant price pullback. How to ride the bull market with minimum risk to yourself?
The bull market definition
Crypto markets often experience day-to-day (or even moment-to-moment) volatility, this is why the bull market term is generally reserved for:
- Longer periods of mostly upward movement
- Substantial upward swings (20% is the widely accepted figure)
Also, we can define a bull market as a period where the majority of investors are buying, market confidence is at a high, and prices of assets are rising.
Investors who believe that prices will increase over time are known as “bulls.” As investor confidence rises, a positive feedback loop emerges, which tends to draw in further investment, causing prices to continue to rise.
Know the end of a bull market
It can be easy to misinterpret short-term downward movements as the end of a bull market because there will be dips and corrections along the way.
As you can see bull markets don’t last forever, and at some point, investor confidence will begin to decline. A sharp downwards price movement can begin a bear market, where more and more investors believe prices will continue to fall.
This is why it’s important looking at price action over longer time frames. Because every time bitcoin has proceeded to rally more than it pulled back.
Remember about pullbacks and rallies
In the case of bitcoin, we’ve seen pullbacks all too often. Every time experts, investors, media panic and think the end is near, only to be proven wrong again.
Forget the noise, you should understand the asset.
Bitcoin is like early-stage investing. Throughout history, innovative tech has always brought volatility. The recent bitcoin pullback has been terrible, bitcoin price was -40% off its all-time highs of $69,000. While many experts believe that we will likely see a further fall to $32,000 the bitcoin's price increases again.
Buying on dips of over -30% has historically played out to be a good long-term investing decision.
Additionally
Instead of following what people say, you should just look at what other investors are doing with their money. How to do that? In crypto, everyone’s wallets are visible to the public so you can see what investors are putting their focus and money into.
Use the Fear & Greed index. What does it mean? It is a data-driven indicator that tracks market sentiment. Another pullback brings another bout of fear. Every time the Fear & Greed index has flashed ‘Extreme Fear’, it might as well have flashed ‘Buy’.
But you should consider whether it's worth 'Sell' when the Fear & Greed index flashes ‘Extreme Greed'.
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